Deputy Finance Minister Julapun Amolunvivat (left) spoke to supporters of the digital wallet project at the Thailand Contribution Party headquarters last month. (Photo: Somchai Phumrad)
Analysts have questioned the ability of digital wallet policies to stimulate the economy, noting that costly stimulus measures pose risks to the country’s fiscal stability in the medium term.
Naris Satakoldeja, head of ttb Analytics, said consumer spending this year is growing steadily among some people who still have purchasing power.
The plan should have a special focus on vulnerable groups and other targeted beneficiaries, he said.
The think tank estimates that the digital wallet benefit will increase next year’s economic growth rate by about 0.5 percentage point from the originally expected 3.2%.
Public debt currently stands at 61.7% of GDP. After implementing this policy, Thailand’s rate will exceed that of many neighboring countries, including Indonesia’s 39%, the Philippines’ 61% and Malaysia’s 62%, Naris said.
“Governments regularly have to borrow around 3-5% of GDP, resulting in public debt stock increasing by 6-8% annually. Without serious structural reforms, public debt will rise to around 3-5% of GDP. There is a risk of reaching a 70% ceiling of 14 trillion baht by 2027.”
“This would increase the fiscal burden and lead to the government limiting other stimulus measures in the future.”
financial monitoring
According to KKP Research, high public debt and lack of fiscal discipline can have three effects on the economy:
First, the government’s ability to implement fiscal policy will decline.
“As a result, there is a risk that the government will not be able to fully play its role in supporting the economy if new crises occur in the future,” KKP said.
The second effect is that high public debt levels can increase borrowing costs for governments.
Third, the move could cause an increase in foreign capital outflows, leading to currency depreciation and higher inflation, especially in countries that borrow heavily in foreign currency or are heavily dependent on imports, the research agency said. .
“Policies that significantly increase government spending and budget deficits, such as subsidies, may help stimulate the economy in the short term, but they impose long-term obligations on the state and reduce public debt levels in the future. It becomes more difficult to reduce,” KKP said.
The think tank found that public debt could reach an upper limit of 70% of GDP within 10 years as fiscal deficits increase due to the implementation of various policies, including digital transfers.
“Revenue and expenditure reforms may help alleviate the burden of high public debt to some extent, but they will not help the country achieve long-term fiscal sustainability,” KKP noted.
“Looking to the future, the government will face further challenges in resolving public debt as an aging population exacerbates structural budget deficits.Thailand’s economic growth potential is likely to continue to decline. , the public debt problem will get even worse.”
All these challenges reinforce the importance of government policies focused on increasing investment to resolve structural issues and foster Thailand’s economic growth in the long term, the think tank said.
There is an obstacle ahead
Art Pisanwanich, economic consultant at Intelligent Research Consultants, said the government’s borrowing plan to fund the digital wallet plan is expected to increase public debt to 67% of gross domestic product (GDP). said.
If the government wants to reduce public debt to its current level, the gross domestic product (GDP) needs to expand by at least 3.5-4% every year, ensuring an annual GDP increase of 700 billion baht, Art said. he said.
This means the government needs to stimulate both investment and exports to increase significantly next year, he said.
“Stimulating the economy by putting money in the hands of the people in this way is difficult because of obstacles such as the country’s competitiveness, such as high production costs and Thailand’s low workforce skills compared to neighboring countries, which still remain unresolved. ,” Art said. , former director of the International Trade Research Center at the University of the Thai Chamber of Commerce and Industry.
“The infusion of funds from digital wallets is expected to increase GDP at market prices by a factor of 1.5-2. However, after deducting inflation, if inflation rises by 1-2%, the actual GDP expansion will be It’s more likely to be less than 1%.”
He said the financial injection is only a short-term stimulus and given high interest rates, people may not spend as much and may delay consumption.
Check conditions
Kobusak Putrakul, senior executive vice president of Bangkok Bank and former minister in the Prime Minister’s Department, said he would like to see if the terms of the scheme change after the promulgation of the loan law.
“There is still time, as this system will need to be reviewed and eligibility conditions determined when it comes before Congress,” Kobsak said.
“It is clear that the benefits will not be distributed to everyone, but to about 50 million people.”
He said the digital wallet policy is expected to boost GDP by an additional 1 percentage point, with growth expected to be around 3% in 2023 and 3-4% in 2024.
Kobsak said exports are expected to remain stable next year as the global economy remains weak, but domestic consumption is unlikely to fully recover, so there will be less investment.
“It is unclear how many times the funds will be circulated. I think it is unlikely that funds disbursed under this system will be circulated more than once,” he said.
“This policy is expected to contribute to stimulating the economy and at the same time raise the public debt-to-GDP ratio by 2-3 percentage points, resulting in a level of around 62-63%.”